Counting the cost of the 2015 Summer Budget

Booze, fags and petrol duty had no place in the Conservatives’ first Budget in almost two decades. Chancellor George Osborne got down to business in this summer bonus Budget with an hour-long speech that left many of those working in affordable housing reeling.

Social landlords still considering the business ramifications of the government’s planned introduction of right-to-buy for affordable homes were dealt a second blow when Osborne announced that social housing rents in England would be cut by 1% a year from 2016 for four years.

The move is ultimately intended to tackle the growing benefits bill resulting from increasing rents, and is, as Osborne said, “a welcome cut in rent for those who pay it”. But it further puts the business model of the developing registered social landlord under pressure, and could ultimately change the shape of the sector.

The full impact of the measure has yet to be assessed, and a new Welfare Reform and Work Bill will add further detail, but National Housing Federation chief executive David Orr has already said that the move will, “massively constrain housing associations’ ability to meet the shared ambition of themselves and government to drive housing growth and new jobs. At the very least, 27,000 new homes will not now be built, though that figure could be much higher.” Chartered Institute of Housing chief executive Terrie Alafat echoed that comment, saying that “cutting social housing rents by 1% a year over the next four years is going to make it much tougher to build new homes at a time when we desperately need to do so.”

Alongside this the government is to introduce a require social housing tenants with an income of £30,000 in England or £40,000 in London, to pay a market rent. It has been estimated that this move could result in around 340,000 tenants having to move out of their homes and into the private sector.

Other Budget announcements included:

  • Housebuilding: The Chancellor confirmed the government’s intention to launch a Help to Buy ISA in the autumn, which will provide a maximum £3,000 top up for homebuyers. The reduction of some tax benefits on buy-to-let properties could take some of the heat out of the market, a fact reflected in immediate dips in some housebuilders’ share prices following the announcement. Savills director of residential research Lucian Cook tweeted in reaction to the announcement: “Housebuilders will probably be more reliant on help to buy with less demand from buy to let investors”
  • Roadbuilding: Vehicle Excise Duty will feed into a new dedicated Roads Fund. The government has also allocated £30m of funding to transport in the north, with cities and counties being given more control over their policies and investments
  • Northern Powerhouse: The ambition continues, with the Chancellor announcing plans for a ‘land commission’ in Manchester to oversee all public sites in the region. Talks are in progress for Leeds, Sheffield and Liverpool to follow Manchester’s lead in taking on directly elected mayors, while the Chancellor said Cornwall could benefit from the first countywide deal
  • Energy efficiency: Government has pledged to review the business energy efficiency tax landscape, with a view to simplifying the regime.

The Chancellor said further planning reforms would be announced later this week.

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